How to transfer shares in a company, what are the procedures and restrictions for transferring shares?
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Table of Contents
What is a transfer/transfer of shares?
What are the reasons for transferring/transferring shares in a company?
What is the process of transferring/transferring shares in a company?
Restrictions on transfer/transfer of shares?
Stamp duty considerations for transfer of shares
When there is a transfer of shares in a company, it is sometimes due to business transfer, change of shareholding ratio, withdrawal of shareholders, or addition of new shareholders. The purpose of this article is to share the procedures and points to note for the transfer of Hong Kong limited company, as well as the relevant documents required such as the share transfer form, in order to help those who are interested in transferring shares to prepare in advance.
What is a share transfer/transfer?
If you need to change the share structure of your company, such as adding new shareholders or adjusting the shareholding ratio among existing shareholders, transfer of shares is a common option.
Transfer of shares is a common practice among Hong Kong companies. It usually refers to the process of selling or giving existing shares from one person to an existing shareholder or a third party.
What are the reasons for transfer of shares in a company?
When it comes to transfer of shares / share transfer, there are various factors that trigger the process. The most common reasons include
To facilitate a corporate reorganization, such as transferring shares of a company from a parent company to a new company.
To adjust the existing shareholdings among shareholders in order to arrange for new profit sharing or ownership.
The entrepreneur plans to sell the business or wants to sell part of his or her shareholding for cash.
What is the process of transferring/transferring shares of a company?
The share transfer process usually takes only 2-3 working days to complete. The specific process is as follows:
Ensure that the pre-emptive rights to the shares have been exercised or waived.
The transferor and transferee sign an application for transfer of shares.
Present the relevant application form and shares to the company and await approval from the Board of Directors.
Prepare the relevant forms and the sale agreement form for stamping.
After the forms are stamped, the details of the transferee are confirmed and registered with the Company’s registrar. Once the registration is completed, the process of transferring the company’s shares is deemed to be complete.
If the shares are to be transferred to a third party, the company will need to determine the terms of the purchase through a share purchase agreement. This agreement will detail the terms of the purchase, including the price, conditions and guarantees of the transferor’s financial liabilities to the company.
What are the restrictions on transferring/transferring shares?
When acquiring or intending to acquire shares in a Hong Kong company, investors must be aware of the relevant restrictions on transfer of shares as set out in the Hong Kong Companies Ordinance. These include a prohibition on a Hong Kong company providing financial assistance to a third party in the purchase of its company shares.
This means that the Hong Kong company or its subsidiaries are not allowed to provide any acquisition-related assistance to the investor, either directly or indirectly. A Hong Kong company and its subsidiaries are also prohibited from providing debt relief to an investor if the investor incurs any debt in connection with the acquisition of shares in the company. If a company provides any debt assistance to an investor, it may be subject to penalties and fines.
Stamp duty to be considered when transferring/transferring shares
Stamp duty must be considered when a shareholder transfers shares of a company to another person. Under the Stamp Duty Ordinance, stamp duty is payable on all purchases and sales of shares in Hong Kong, and the rate of duty depends on the value or amount of the shares.
In addition to a fee of $5 per share transfer, each party is required to pay a tax of 0.13% on the net assets of the transferring company, for a total of 0.26%.
For example, Party A sells 1 share of common stock to Party C, which represents a 20% interest in the company. The net asset value of the company is $100,000. Then, the amount of stamp duty to be paid by A and C is as follows:
Stamp duty amount = ($200,000 x 20%) x 0.13% x 2 + 5 = $109
The above information is for reference only. If you have any tax return (personal tax return, corporate tax return, accountant tax return) queries or information, you are welcome to contact our professional advisors and we will provide you with free quotation and consultation services later. #transfer of shares #transferofshares
